ITAT rules no TDS on payment to resident individual, citing lack of agency evidence

The ITAT ruled in favor of the assessee, holding that since the payment was made to the resident individual and not directly to the non-residents, no tax deduction at source was required under section 195 of the Income Tax Act, 1961. The decision emphasized the lack of evidence showing the resident acted as an agent for the non-residents, aligning with precedents from the ITAT, Chandigarh. As a result, the ITAT set aside the order passed by the Ld.CIT(A) and quashed the demand, allowing the appeal of the assessee.

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Issues Involved:
Non-deduction of tax at source and payments made to non-residents, levy of interest u/s 201(1)/201(1A) of the Income Tax Act, 1961.

Analysis:

Issue 1: Non-deduction of tax at source and payments made to non-residents
The case involved the purchase of an immovable property from a resident individual and his two non-resident sons. The assessee contended that the entire consideration was paid to the resident individual, including the shares of his non-resident sons, and thus, no tax deduction at source was required under section 195 of the Act. The Assessing Officer (AO) treated the assessee as an assessee in default and raised a demand. However, the ITAT found that since the payment was made to the resident individual and not directly to the non-residents, the provisions of section 195 did not apply. Citing a similar case from the ITAT, Chandigarh, the ITAT held that unless the revenue could establish that the resident acted as an agent to receive money on behalf of non-residents, the provisions of section 195 could not be invoked. Consequently, the ITAT set aside the order passed by the Ld.CIT(A) and quashed the demand, allowing the appeal of the assessee.

Conclusion:
The ITAT ruled in favor of the assessee, emphasizing that the payment was made to the resident individual, not directly to the non-residents, and therefore, there was no requirement for tax deduction at source under section 195 of the Income Tax Act, 1961. The decision was based on the absence of evidence establishing that the resident acted as an agent for the non-residents, in line with precedents from the ITAT, Chandigarh.

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